SiriusXM could be the next company hit hard by the chip shortage, but “sticky” subscribers are helping cushion the blow

Tuesday, April 19, 2022 by Snacks

The sound of Pop2K... a road-trip playlist must. SiriusXM, the home of Howard Stern and all-day Bruce Springsteen radio, was once a struggling player in a dying industry. It has since turned its fortunes around by focusing on cars… and drivers who’d rather flip on their fave station than fiddle with an aux cord. But Sirius shares fell nearly 3% yesterday after an analyst said the car industry’s ongoing chip shortage could turn into a profit prob.

  • Last quarter Sirius’ free-trial subscribers fell 19% from 2020, partly because of declining car sales. FYI: Sirius relies on converting its trial members into full-time subscribers to make $$.

Capitalizing on the commute... Sirius’ market cap is nearly the same as Spotify’s (about $26B), thanks to its 32M+ monthly subscribers. Over the years, automakers from GM to BMW have teamed up with Sirius to integrate its satellite-radio software into their newest models. Now over 80% of new cars sold are Sirius-equipped. But global supply shortages that’ve made car inventory so tight have also put the squeeze on Sirius to diversify:

  • Sirius is focused on creating content for on and off the dashboard, like hosting exclusive virtual concerts and building up its slate of podcasters.

Low churn is the key to profits… Till now, Sirius has largely dodged its car troubles by providing a wide variety of curated programming for road warriors, whether they want Top 40, podcasts, or Howard. And they’re still tuning in: Sirius’ churn rate (aka the # of subscribers who opt-out each year) is less than 2%. That’s better than traditional streamers like Disney+, Spotify, and even Netflix. Yet its long-term success is still tied to the health of the car market.

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